The Monetary Policy Committee is meeting in Pretoria to decide on interest rates for the next quarter, with analysts saying the Repo rate will probably remain unchanged.

FNB chief economist, Cees Bruggemans, has told Summit TV that rates will probably stay at 5.5%
"I suspect we’ve lost the cycle and that is partly a reflection on inflation as such where we’ve seen the peak and it’s coming back into the target zone. If it was purely inflation behaviour – given the level interest rates have been reduced – you would expect an increase to take place sometime, but you have to see inflation together with the state of the economy, where that’s not growing as fast as they hoped. Capacity utilisation is not where they wanted it," he said.

"Then extremely importantly there is international crisis risk, and keeping one’s powder dry to see what materialises before seeing what one should do. With all three factors one has very good reasons to hold back."

Liberty Retail Consumer Economist, Tendani Mantshimuli says inflation is causing a challenging situation.

"We know inflation is trending high and is expected to breach the upper band of the target (6%) later in the year through early next year. For that reason the MPC should be seriously considering to raise the interest rates," she says.

"Inflation will be further fuelled by the wage settlements from the current ‘strike season’ which are way above 6 per cent. This is besides other administered prices like the higher electricity and other municipal rates increases. We know that motorists too will pay higher prices particularly in Gauteng with the impending toll fees."

Mantshimuli says consumer behaviour going forward is going to influence a decision.

"South Africa is an inflation targeting economy; interest rates change to make sure that inflation will remain within target. Consumer behaviour will influence inflation in so far as their behaviour in terms of wage demand pushes inflation higher."

Bruggemans says external factors are also likely to influence a decision.

"The presumption is that at some stage rates will be raised but given the way things are unfolding the risks will be with us for quite a while," says Bruggemans.

"The inflation rate is going to peak and then start to come back into target and the economy may continue to underperform. Under these circumstances they may play it like Ben Bernanke and keep interest rates low for longer than people expect."